Europe's Future Looks Bleak ... America's Too?

A Continent's Discontents reviews the book "After The Fall" by Walter Laqueur. Concluding that Europe's future is bleak, it contains valuable lessons for Americans as well.

In pertinent part here's what the reviewer says:

"When the West found itself lacking for serious rivals after the collapse of the Soviet Union, an era of optimism dawned on both sides of the Atlantic. . . . Meanwhile, in Europe, a few philosophers and Eurocrats entertained . . . the comforting idea that their continent was a natural blueprint for the rest of humanity. . . . {T}hey predicted that the world wouldn't just converge on some generic form of liberal democracy—but rather on its European incarnation, complete with an aversion to military force, a generous welfare state and the post-national form of sovereignty embodied by the European Union.

But as Walter Laqueur argues in "After the Fall: The End of the European Dream and the Decline of a Continent," this dream was delusional from the start. Mr. Laqueur's case seems easy to make in these times. We have all become well-acquainted with Europe's woes, from the sovereign-debt crisis to the danger that disagreements about how to handle it might tear the political institutions of the EU apart.

In this loosely linked series of thematic essays on Europe's troubles, Mr. Laqueur paints an even starker portrait. For him, the current crisis is but the most visible manifestation of a deeper malaise. Economically, he argues, many European countries had been faring badly even before 2008, with provisions for health care and pensions having become unsustainable. Militarily, Europe has long been virtually irrelevant on the global stage. . . ."

So what do the lessons of Europe have to teach us about our potential American future? A lot.

We have a presidential election this year, and the issues to be decided will in large part center on whether we'll follow the European welfare state model or turn back toward the self reliant America that we once were.

2012: A U.S. Referendum on Europe argues that Europe's current woes are as much related to its vision and character as to its sorry financial condition.

My view is that our U.S. issues are vision and character related as well. We need to answer such questions as:

"Should government be an engine of employment growth? Does government investment in favored industries or technologies make economic sense? May government compel individual economic choices in the name of a social good? Should the rich pay an ever-rising share of the total tax burden? Are higher taxes the best way to close a budget deficit? Is financial regulation generally effective? Are labor unions good for overall employment? Is inclusiveness the best test of fairness? Must environmental concerns (or phobias) take precedence over economic interests? Is consensus-seeking the ideal mode for international conduct?

To all these questions, Mr. Obama's record answers yes: the Solyndra and Fisker subsidies; the Keystone XL pipeline postponement/cancellation; Dodd-Frank; the SEIU's Andy Stern as the top White House visitor; the growing government work force; the individual mandate; the nonstop rhetorical assaults on Wall Street; federal debt moving north of 100% of GDP; the "balanced approach" to deficit reduction; the perpetual deference to the United Nations.

That's the Obama presidency in a nutshell. It's also how Europe, mutatis mutandis, became what it is today. . . . The truth is that what began in Greece (and the U.S. financial crisis before it) simply put a match to already very dry tinder. Uncompromising labor unions have spent decades driving European jobs and industry overseas. Confiscatory tax rates have given every incentive to tax evasion, capital flight and the emigration of the fittest. Work-force rules have diminished productivity and discouraged hiring. National budgets have been strained to breaking by delusional pension promises and the mounting cost of everything a welfare state supposedly offers free, like health and education."

So we have some decisions to make about our American future.

If the baby boomers and the rest of us old people want to continue to "enjoy" such things as social security, subsidized drug prescriptions, medicare and nursing home care as a matter of right, someone someday will have to pay in full for these "rights." And that someone will be the American taxpayer, and most specifically the taxpayer of the future.

Same thing with respect to young people and their "right" to a free and expensive public education, including college. Today this evidently includes the right of both students and teachers not to be accountable for the quality of that taxpayer funded "education."

And if we choose to pay our union represented workers more than a globally competitive or free market wage, we'll have to have someone subsidize that uncompetitive pay. That subsidy will undoubtedly come from our fellow citizens, probably in the form of a lower standard of living for future Americans.

And if we don't want to witness free market "creative destruction" and the harsh reality of occasionally seeing factories close, businesses fail, people laid off or other unpleasant facts of life in competitive markets, someone will have to pay for that shortfall as well.

That someone, of course, will be "all of us" as our standard of living will decline over time. We'll become even more like Europe.

Free market competition is harsh, capitalism is harsh, self reliance is harsh, hard work is harsh, and saving today for tomorrow's needs in lieu of spending our money immediately is harsh as well. It would be much easier if someone did our work for us.

In that regard, more than 50% of Americans in a recent survey wrongly attributed the following quote to George Washington, Thomas Paine or Barack Obama, "From each according to his ability, to each according to his needs." Of course, Karl Marx is the correct answer, and he was explaining the virtues of communism at the time.

But that's not much different from Mitt Romney taking credit for creating 100,000 jobs or Newt Gingrich and Rick Perry condemning Romney for closing factories and laying off workers. That's how competition unfolds in a free market.

Competitive markets generate winners and losers. Those who invest and thereby risk their time and money competing in the private sector do so for personal gain and not for the purpose of creating jobs. Adam Smith explained that "harsh human reality" in "The Wealth of Nations," published in 1776.

In other words, new jobs are the result of successful business endeavors and not the primary object thereof. A successful company creates jobs when it employs people to produce products to supply the free market's wants and needs.

If the business prospers, new private sector jobs will be created. Then tax receipts will increase as well. It doesn't work that way when government creates jobs.

To wit, government can create jobs merely by hiring people and putting them on government's payroll. Productive or not, providing value or not, serving a need of the market or not, they get paid--by taxpayers. And as a result government deficits often increase.

Government serves no free market. Government takes money from some people and gives it to other people, whether by paying government employees or through redistributing or recycling that money from one private citizen to another.

Let's look at how redistribution works through the example of middle class social security benefit payments. If a recipient had paid for his retirement benefits in full during his working career, there would be no government shortfall. Of course, why then would he wish to participate in the government program? But let's assume that he would.

In that event, he would have entrusted his money to the government for either safekeeping or investing, or both, and then the government would simply return it to him in the form of monthly benefits upon retirement.

So what are our "rights" under the social security program? To get back more than we "contribute" in taxes? To get back a guaranteed amount, no matter if or how it was invested, if at all?

If so, who will make up the shortfall? And if that's not within the definition of a welfare program, then what is?

Yes, 2012 is an important election year for Pogo and his fellow Americans. But there will be many more such election years in the future, too.

We can change direction any time we choose, if we choose, but first we have to decide what kind of society we'll leave to future generations.

That's how self governing societies function. We're free to choose on behalf of those who follow.

Here's hoping we choose to take that serious responsibility seriously.

Thanks. Bob.